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Malawi – Reinforcing Economic Growth through Inclusive Land Development

LILONGWE, November 22, 2017—Malawi’s government has an opportunity to focus on key structural issues critical to sustained economic growth, by building on macroeconomic foundations laid down over the last year, according to the Malawi Economic Monitor (MEM) released today. These include land reform.

Entitled Land for Inclusive Development, the 6th MEM estimates that Malawi’s GDP growth will increase to 4.5 percent in 2017, from a much lower 2.5 percent in 2016. To stay this course and prepare the way for a path to higher long-term growth, the World Bank Group stresses the importance of maintaining and deepening macroeconomic stability, fiscal discipline, and debt sustainability. It says the country also needs a combination of a large boost in medium-term investments and deep structural reforms to strengthen conditions for the private sector. These reforms should include the availability of energy, and land reforms.

With a focus on land and its potential to drive growth and reduce poverty, the MEM identifies land reforms, including defining land rights, as crucial to private sector investment in agriculture and related productivity. “As an agricultural country, assured land tenure security and effective land institutions in Malawi can stimulate both smallholder and large estate investments in agriculture, and so help consolidate the growth path achieved in 2017,” said Greg Toulmin, World Bank’s Country Manager for Malawi.

The MEM acknowledges the recent passage of Land Laws as necessary to secure land rights, especially for women and vulnerable groups. Land tenure insecurity among smallholder farmers in Malawi is still high, as shown by the 2016/17 Integrated Household Survey, with one third of households not confident that they would still possess their land plot in ten years’ time. As the MEM observes, tenure insecurity reduces investment in higher value crops or soil conservation measures, which results in lower productivity levels.

The MEM recommends improving the planning and management of land resources at central and local levels, as this has a potential to generate revenue. For example, weak or expired leasehold records cost the government more than $10 million annually in foregone ground rent from estates and urban areas alone. The MEM observes that weak land administration reduces Malawi’s attraction as an investment destination.

The importance of structural reforms for sustained inclusive growth is further emphasized in the Country Economic Memorandum (CEM) From Falling Behind to Catching Up and the Malawi Investment Climate Assessment (ICA), both also released today. The CEM improves our understanding of the structural development policies needed to address macroeconomic instability and persistent poverty in Malawi.

The CEM recommends policy in four areas: macro-economic stability, agricultural transformation, private sector development, and institutional reform. The ICA looks into private sector development and recommends a more rapid and consistent pace of reform in: productivity, especially medium sized firms; improving access to finance; prioritizing infrastructure, such as for energy; and addressing corruption.